The troubled crypto lender, Celsius Network, has received judicial approval to seek creditor endorsement for its bankruptcy escape plan. Under this plan, a consortium going by the name of Fahrenheit is poised to acquire Celsius’ assets, forming a fresh corporate entity. This new entity would then proceed to allocate Celsius’ assets and equity among its clientele, potentially allowing creditors to recover a substantial portion of their holdings.
Celsius Network declared bankruptcy in May last year after a massive dent in its balance sheet caused by the catastrophic collapse of the Terraform ecosystem. The bankruptcy filing reported between $1 billion and $10 billion in assets and liabilities, with over 100,000 creditors. The implosion led to a bidding war for the bankrupt company, with the crypto consortium Fahrenheit winning the battle to acquire the company’s assets.
The new deal, valued at roughly $2 billion, includes securing $450 million to $500 million in liquid crypto funds and building crypto mining facilities, including a new 100-megawatt plant. The group of buyers includes prominent firms such as venture capital investor Arrington Capital and miner US Bitcoin Corp.
Celsius Network creditors could recover up to 85% of their holdings
The plan’s approval signals a significant step towards recovering funds for Celsius’ creditors. According to the disclosures, creditors can expect to recover between 67% and 85% of their holdings. Earn Account holders could recover around 67% of their holdings, while Celsius’ Borrow Program participants could recoup up to 85.6% of their investments. In comparison, liquidating the assets yields only a 47% recovery rate.
The regulatory nod was granted by Judge Martin Glenn at the Southern District of New York bankruptcy court. The judge also instructed Celsius to offer a clear explanation of the settlement terms and provide detailed information surrounding the inherent volatility of cryptocurrencies and possible hurdles that its mining operations might face.
Creditors will have the opportunity to vote on the proposed plan, with ballots to be cast between August 24 and September 22. Participation in the settlement is automatic for Celsius’ customers, with an opt-out option available for those who wish to abstain.
The Celsius Network’s bankruptcy escape plan represents a tentative step toward resolution for the beleaguered company. The proposal, if approved by the creditors, will still require subsequent court ratification, a decision expected to be rendered in October.
The plan also encompasses issues of mismanagement, deceit, and fraud laid at the doorstep of Celsius’ leadership, aiming to boost potential recoveries for its users. Legal representation for Celsius indicated that disbursements could kickstart before the year’s conclusion, marking a significant milestone in Celsius’ year-long journey out of bankruptcy.
